Latest Asda Setback Only Adds To A Long Line of Walmart International Stumbles - Forbes

The deal to get out of Asda has hit a roadblock for parent company Walmart.Getty

Walmart is the most successful retailer in America ever.

Outside of the United States, not so much.

The news today that the company’s planned hand-off of its Asda division in Great Britain to rival Sainsbury’s is now in question and may not go forward is only the latest in a decades-long tableau of setbacks, disappointments and out-and-out failures on the international stage. For a company that relentlessly came to overwhelm all competitors and far out-distance itself from the rest of American retailing to mess up so consistently elsewhere in the world is one of the great global business paradoxes of the past 50 years.

A little context, however: Walmart does a huge amount of business outside the United States. International sales, at $118 billion last year, represent more than 20 percent of its overall $500 billion in annual revenue. As such it would qualify as one of the biggest retailers on the planet even if you took away its domestic sales.

But in the 28 years since it opened its first store outside the U.S. – a Sam’s Club as part of a joint venture in Mexico – Walmart has failed to have the success it has enjoyed in its home country. There have been high points – Mexico and Canada stand out – but in Europe, Asia and South America the story is very different.

Great Britain: The Asda news comes as particularly disappointing for an overseas operation that was once held up as the role model for the company’s international ambitions. Bought in 1999, Asda is a combination general merchandise and grocery store, the same footprint as a Walmart Superstore and seemingly a good fit for the parent company.

At one time, the store’s private label apparel brand, George, was even brought over to Walmart stores in the U.S., hailed as the answer to the ongoing struggle of its fashion business back home.

A UK agency released a report today that the merger of Asda into Sainsbury’s could lead to higher prices and fewer consumer choices has thrown the prospects for the deal into a tizzy, possibly setting the stage for the parties to call off the entire thing, or at least scale it back considerably. Sainsbury’s has called the report “outrageous” and no doubt will fight for the deal as is but its prospects remain uncertain at best.

Germany: Two years before it bought Asda, Walmart bought another hypermarket-type operation, Wertkauf, in Germany. With 85 stores it was not a dominant player in the local market but Walmart had big plans for the chain.

Visits to a store just outside Frankfurt right after the deal and a year later clearly showed Walmart’s gameplan. The store was renamed Walmart and with its revamped signage, fixturing, layout and merchandising, it could have just as easily been in Frankfurt, KY as Frankfurt, Germany.

Germany was less than impressed however. The Americanization of the store did not reflect the way Germans shopped and they never really adapted the Walmart way to shop. Nine years later, the German operation was sold to the big European discounter, Metro, and Walmart licked its wounds and left the continent.

Japan: When it looked to get into the Japanese market, Walmart took a different tack, first taking a small stake in regional supermarket chain Seiyu in 2002. It gradually raised its stake in the company until assuming complete ownership in 2009.

With over 300 stores, Seiyu was also not a market leader but had a good business…at least until Walmart moved in and brought its “everyday low prices” merchandising dictum to the operation. A shopping public more used to high-low pricing didn’t know quite what to make of Walmart’s signature strategy and showed it by taking their business elsewhere.

Last year speculation began that it had put the Japanese business up for sale and while so far no deal has been announced it seems inevitable that Walmart will leave Japan as well.

Korea: Another Asian entry was in Korea, where Walmart opened its first store in 1998, eventually building it up to 16 units in the compact nation. Less than a decade later, it was all over when it sold the operation to a local competitor in 2006. Once again, the reports were that the company failed to adapt its model to local shopping habits, as well as not creating a large enough business to take advantage of savings through scale and bigger buying power.

China: When Walmart opened its first store in China in 1996, it began from scratch, creating a retail operation from the ground up, hoping that not taking over an existing operation and trying to reinvent it would do the trick.

The jury remains out on whether that has happened. There are now over 400 Walmart stores in China and after visiting one, you come away with a mixed image. Parts of the store very much resemble a traditional American Walmart store with signs and displays echoing U.S. operations. But there are distinctly Chinese elements to the store as well: live turtles are for sale, but they are in the seafood section, not the pet department, for instance.

Walmart has been candid in its assessment of its Chinese business but so far seems to be sticking with it. A recent move to shore up its e-commerce business there with local player JD.com seems to be helping.

India: Walmart’s newest international venture happened just a few months ago when it won a bidding war with Amazon for the Indian online player, Flipkart. Apparently determined not to get stuck again with a business weighed down with physical stores in an increasingly online world – as well as to thwart arch-rival Amazon – Walmart paid $16 billion for the privilege.

While there was criticism that it overpaid for the business, those comments were overshadowed just a few weeks ago when a group of more than 100 local Indian organizations. companies and individuals banded together to call for the Indian government to block the deal. Citing concerns about jobs and small businesses, the group has been most vocal and with the Modi government up for reelection this year, this deal may get tripped up by political concessions to this large voting block. So far no action has been taken by the Indian government.

Brazil: In one of its largest offshore units, Walmart at its peak operated more than 470 stores in Brazil, becoming the third largest retailer in the country after first entering the market in 1995 and doubling down twice in the early 2000s. This venture too ended, just last year, when the company essentially gave away 80% of the business to a local private equity firm. The division had lost money for seven straight years and the collapsing Brazilian economy no doubt didn’t help its business prospects.

Canada and Mexico: It is only in the adjacent countries that Walmart can tout its international expertise. After buying the former 122-store Woolco operation in Canada in 1994, Walmart has transformed the operation into a very successful retailer, even helping to repel Target’s ill-fated attempt to replicate that strategy earlier this decade.

In Mexico and spilling over to Central America, Walmart has also found success, reporting earlier this week that this division’s sales were up 5% last quarter, even outpacing its U.S. business. Since taking over the share of its partner, Cifra, in Mexico, Walmart has built up close to 2500 stores, under both the Walmart and Sam’s Club banners as well as smaller drug and convenience-type stores.

While there have been a few other scattered international forays – in South Africa, Chile and with a few physical stores in India – the big overseas initiatives have all struggled, save for NAFTA-based units.

In this respect, Walmart should be cut some slack. Other big retailers from France’s Carrefour to Home Depot have also struggled internationally and many have given up during this same time frame.

Global retailers trying to enter the American market have largely been every bit as unsuccessful. Tesco’s Fresh & Easy launch in the U.S. was a textbook disaster and other European and Asian retailers in both the grocery and general merchandise spaces have done no better.

In fact, the number of global retailers who have been successful taking their business model from their home country to other nations is pretty short: IKEA, Aldi, Zara, H&M and perhaps a few more.

How things eventually get settled in Britain for Walmart remains to be seen. No doubt, it will come up with some plan as it desperately wants out, whatever the cost. It made that clear when it ditched Brazil.

While many American businesses and brands from Marlboro to Boeing have found success overseas, for retailers like Walmart it’s a very different story. What made them successful back home just seems to get lost in translation.

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